ML - Michigan Avenue

2012 - Issue 5 - September

Michigan Avenue - Niche Media - Michigan Avenue magazine is a luxury lifestyle magazine centered around Chicago’s finest people, events, fashion, health & beauty, fine dining & more!

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PHOTOGRAPHY BY NATHAN KIRKMAN (BROKERS) POWER BROKER brokers' round table GURUS WEIGH IN. BY LISA SKOLNIK I IS IT ALWAYS BETTER TO BUY, OR CAN RENTING BE THE SAVVIER SOLUTION? THREE CHICAGO REAL ESTATE n Chicago's tricky residential real estate mar- ket, risk-averse would-be buyers are snapping up rentals lightning-fast, "especially the larger units, which can often top $10,000 a month," says Koenig & Strey's Randy McGhee (312-893- 3566). The result? "Rents are skyrocketing, and people are offering more than the asking price for Warner's Robert the most desirable places," says Baird & Shearer (312-909-8641), a rental specialist. Indeed, a July report from the real estate research firm Reis Inc. confirms that Chicago rents increased almost three percent in the second quarter this year. Yet the stats also say that the housing market in Chicago hasn't recov- ered as well as in many other areas of the country, which makes prime pickings for buyers. "This spring, local home and condo sales hit lows that were last seen here in 2000," notes Baird & Warner managing broker Richard Druker. These developments beg an obvious question, which we tackled at a broker's roundtable: Is it better to rent or buy? Renting has advantages. "Your costs and time frame are fixed, so there are no surprises that come with emergency repairs or a lagging sale," says Shearer. And with the right property, an investor can turn a tidy profit. McGhee points out that a unit at the Elysian went for $2.6 million in January and the buyer rented it in February for $15,000 per month. "If the down payment was about 30 percent, the monthlies are about $13,500 with assessments and taxes, which leaves $1,500 in profits monthly," she notes. But buying can be even better: 136 MICHIGANAVEMAG.COM "It's an Richard Druker, Randy McGhee, and Robert Shearer investment, and you have the potential to build equity," says Druker. Buying can be particularly cost-effective right now, since "rents are high, mortgage rates are astonishingly low (less than four percent), and sellers have been beaten into more realistic frames of mind about pricing," says McGhee. There are steals at every rung of the market. Shearer recently converted a would-be renter to a buyer in his listing for a two-bedroom at 900 Lake Shore Drive because "it made such good fis- cal sense. Rent was $2,495, the purchase price was $325,000, and with five percent down and a 30-year fixed mortgage at four percent, the monthly payment was only slightly more. But it really came down when the homeowner's deduc- tions were factored in," he says. McGhee's two-bedroom listing at 33 West Huron Street for $795,000 with assessments of $636 can fetch $5,000 in rent-based building comps, but could be bougth for only $4,500 a month with 25 per- cent down and a four percent fixed mortgage. And her $3.95 million, 7,500-square-foot gray- stone at 56 East Bellevue Place, built by Potter Palmer, is a steal when you do the math—even considering that jumbo mortgages are at 4.5 per- cent. Assuming it will go a bit below the current listing price, with 30 percent down it would be A two-bedroom at 900 North Lake Shore Drive recently sold for $325,000. A two- bedroom at 33 West Huron Street is listed for $795,000. about $16,000 to $18,000 monthly with taxes, while renting it would be at least $20,000. The verdict? "It's the perfect storm for buy- ing," says Druker. Even Shearer, the city's rental guru, concurs, crowing, "I'm working both sides of the aisle and loving it." MA

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